Monday, March 18, 2013

Wells Fargo receives an education in abandonment

Wells Fargo sued ABD for trademark infringement (under
various names; the court concluded that the heart of its false advertising
claim was that ABD’s name was a misrepresentation of affiliation, and thus was
the same as the trademark claim).The
ABD mark was first used by Alburger Basso de Grosz Insurance Services, founded
in 1990, which changed its name to ABD Insurance and Financial Services in
1997. In 2007, Wells Fargo bought the company and all its assets, including its
mark. In 2008, Wells Fargo changed its name to Wells Fargo Insurance Services.
Wells Fargo didn’t renew its ABD
trademark registrations.

Defendant de Grosz, the son of one of the original founders
of ABD, worked at ABD between 1994 and 1999. In 2011, he learned that the ABD
mark had been cancelled and filed an ITU for the mark.He called another defendant, Hetherington,
who was then working for Wells Fargo, about his intent to use the mark.“The parties do not agree as to Wells Fargo's
response to this call …. Hetherington, having left Wells Fargo in January 2012,
joined the new ABD company.”In
mid-2012, between 60 and 75 former Wells Fargo Insurance Services employees joined ABD,
allegedly soliciting Wells Fargo customers and using Wells Fargo proprietary
information.(There’s a related state
suit alleging claims for breach of the duty of loyalty, intentional
interference with economic relationships, intentional interference with
potential economic relationships, unfair competition, conspiracy, and breach of
contract.)

Wells Fargo moved for a preliminary injunction against the
use of the ABD mark.It argued that, in
2009, it “chose to focus its use of the ABD brand as secondary to the famous
Wells Fargo brand” and changed any business material (such as business cards,
letterhead, etc.) that used ABD “as the primary or sole entity name.” However,
Wells Fargo alleged that the “ABD brand did not disappear,” noting that its
business cards, customer presentations, voicemail systems, and business faxes
still reflected a (secondary) “tie” between Wells Fargo and ABD. It maintained the ABD email domain and
redirected traffic from the ABD website to the Wells Fargo website.

Wells Fargo identified evidence of confusion: “four customer
emails from July 2012, all containing questions regarding the link (if any)
between Wells Fargo and the new ABD company”; an instance in August 2012 in
which an insurer was confused about whether Wells Fargo or ABD was the broker
of record for one of its customers; and a January 2013 subpoena from a law firm
served on ABD in connection with a state lawsuit, in response to which ABD
returned a Certificate of No Records and explained that it “picked up the [ABD]
name but that Wells Fargo had the records.”

Wells Fargo further argued that “even in an industry where
consumers may be sophisticated and careful decision-makers,” no amount of
consumer care can prevent confusion between two companies with identical names.

In opposing a preliminary injunction, defendants mostly
argued abandonment, which requires a discontinuation of use with intent not to
resume. Even a single use can avoid abandoment, but that use has to be bona
fide use of a mark in the ordinary course of trade, not merely token or
sporadic usage. The evidence of abandoment:

(1) Wells Fargo formally merged ABD
into Wells Fargo Insurance Services as of January 1, 2009, thereby ending the
separate existence of ABD; (2) Wells Fargo emails and other internal documents
show that it intended to “retire” the ABD name as of January 1, 2009, and Wells
Fargo instructed its employees that “the ABD name can no longer be used,” that
any “stationery, brochures, and other sales materials” bearing the ABD name
should be recycled, and that the ABD name should be removed from voicemail
messages and email signatures; (3) Wells Fargo did not renew the federal trademark
registration for the “ABD” mark; and (4) Wells Fargo did not maintain the “ABD”
trade name with the California Department of Insurance, and was therefore
prevented from offering insurance services in California under the name “ABD.”

The court noted that the formalities of registration and
maintenance weren’t as important as actual use. And while the internal
documents showed a clear intent to stop using ABD, abandonment requires actual
cessation of use, not just an intent to cease use.Wells Fargo argued that, even after January
2009, it continued to use the ABD name on “business cards, customer
presentations, ‘broker of record’ letters, payment processing, voicemail
messaging systems, and even business faxes.”

But a closer look at these materials wasn’t very helpful to
Wells Fargo.While “ABD Insurance and
Financial Services–A Wells Fargo Company” appeared as a footer on some
presentations, it was accompanied by ABD’s expired California license
number.This suggested that the footer
was a mere remnant from before 2009; at that point, Wells Fargo had no right to
offer insurance services using that license. Another presentation mentioned ABD
only as part of customer testimonials; the presentation was from March 2010,
but there was no evidence about when the testimonials were given. ABD was
likewise mentioned “in an historical context” in other presentations, e.g., “Wells
Fargo Insurance Services USA, Inc. (formerly ABD Insurance & Financial
Services) is now ranked ...”Similarly,
the business card Wells Fargo submitted contained an outdated license number,
address, phone number, and email address, and the solicitation emails sent by
its employees mentioned ABD in the context of the Wells Fargo acquisition.

Wells Fargo also maintained domain name registrations
containing ABD, and used ABD and related terms as keywords in its metatags. It
also submitted correspondence and checks from customers using the ABD name;
Wells Fargo continued accepting such checks into 2012.(I’d be surprised if Wells Fargo turned many
checks away.)Declarations from
employees also (identically) stated that “[m]any clients and the marketplace
continue to associate Wells Fargo's Bay Area insurance brokerage business with
the ABD name and the ABD business.”

The key issue was whether these post-2009 uses were “bona
fide” use in trade.The court concluded
that, at least for purposes of meeting the heavy burden required for a
preliminary injunction, Wells Fargo hadn’t shown it was likely to succeed on
this argument. The court was persuaded by Cascade Financial Corp. v. Issaquah
Community Bank, 2007 WL 2871981 (W.D.Wash. Sept. 27, 2007), involving a bank
that rebranded from Issaquah to Cascade but continued to process Issaquah
withdrawal slips and checks, maintained Issaquah domain names, and advertised
using Issaquah.In Cascade, the court found that defendants were likely to succeed on
their abandonment defense, particularly given that Cascade had “taken
affirmative steps to encourage its customers to stop using the Issaquah Bank
name.”

There were striking similarities to this case, in which
Wells Fargo tried to rebrand ABD.“Like
Wells Fargo, Cascade did not maintain the corporate status of the company that
it acquired, instead choosing to operate its business under one name. Like Wells
Fargo, Cascade maintained the domain names of its acquired company, but
redirected website traffic to its own website. And like Wells Fargo, Cascade
continued to accept documents bearing the acquired company's name from its
customers.”Wells Fargo’s post-2009
users were either residual or in the context of historical background, not uses
in the ordinary course of trade.

The court also analyzed the evidence of actual confusion.
The customer emails were immediately after the launch of the new ABD website,
not evidence of continuing confusion. As for the subpoena, that doesn’t show
ordinary consumer confusion, but rather a mistake about the possession of
certain corporate records.“While this
may be some evidence of confusion, it is certainly not evidence of consumer
confusion.”

This also bore on the degree of care exercised by
purchasers.Defendants argued that their
business was relationship-driven and offered declarations from two customers
stating that they chose ABD based on their relationships with brokers who left
Wells Fargo for ABD and weren’t confused.“Insurance brokerage is not an industry where customers make purchases
on a whim, and can be easily fooled by the name of a company.”One unsolicited email, for example, came from
a customer to one of the Wells Fargo-to-ABD employees.The customer learned that the broker had left
Wells Fargo and sent an email to his personal email address, expressing a
desire to “explore what to do and determine what's in the best interest of our
plans.” The customer noted that “Wells Fargo is anxious to keep our business,”
but made clear that he “value[d]” the ABD people “much more as individuals than
as Wells Fargo employees.” It might well
be true that Wells Fargo lost many customers to ABD.But that wasn’t evidence of losses due to confusion.

As for intent, which Wells Fargo contended was strongly in
its favor, the court noted that “it does seem clear that defendants chose the
mark to signal some sort of link with the original ABD company, and not merely
as a way to ‘honor their fathers and their legacies.’” But Wells Fargo put too
much weight on this factor and on its employees’ alleged betrayal. Its
allegations were far more relevant to its state court lawsuit.Because Wells Fargo didn’t show any examples
of consumer confusion after mid-2012 (I believe the court made a typo here and
have corrected it to be consistent with the rest of the opinion), and because
customers were likely to exercise a high degree of care, the Sleekcraft factors weren’t decisively in
its favor despite ABD’s bad intent.(An
outlier, per Barton Beebe, whose empirical research found a bad intent finding
highly correlated with a plaintiff victory.)

Confusion and degree of care was also directly relevant to
the (un)likelihood of irreparable harm. “The fact that all cited examples of
consumer confusion occurred in the weeks immediately following ABD's launch
further supports a finding of no irreparable harm. To the extent that Wells
Fargo was harmed by any confusion that occurred in those weeks, such harm can
be remedied by monetary damages.”Injunction denied.

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